Wednesday, July 13, 2011

It's The Election, Stupid: How Obama is Leveraging Debt Ceiling Negotiations to Win Reelection and Regain the House

The drama unfolding in Washington the past few days has nothing to do with the debt ceiling. It doesn't even have to do with the federal budget. Barack Obama's noble, President-of-both-parties overwillingness to compromise since 2009 seems to be giving way to a leaner, meaner, more Machiavellian campaign mindset, and Candidate Obama appears to have his eyes set not only on his own reelection but on engineering a Democratic re-takeover of the House of Representatives, using the debt ceiling negotiations as his chosen, and carefully pre-surveyed, battlefield.

The G.O.P.'s Three Weaknesses:

Since Ronald Reagan's election in 1980, the G.O.P. has had a very good run in Washington: they have persuaded Americans that "liberal" is a dirty word, retained the "fiscal conservative" moniker despite octupling the national debt, and rebounded after presidential setbacks in 1992 and 2008 by exploiting Clinton's and Obama's nonexistent "coattails" to gain impressive new Congressional majorities. But while the conservative juggernaut has been formidable, the Republicans have made three blunders in the past thirty years that exposed their vulnerabilities and knocked them profoundly off their pace.

Here are the G.O.P.'s three "classic blunders," the errors that for them are the political equivalents of getting involved in a land war in Asia:

1. Running a weak Republican for President against a charismatic, Kennedy-esque young Democrat;

2. Shutting down the government, as Newt Gingrich did in 1995-6; and

3. Breaking a promise not to raise taxes (which cost George H.W. Bush reelection in 1992).

The G.O.P. can't help but repeat blunder number 1 in 2012: the G.O.P. field is weak, and Obama will be the Democratic candidate. Obama is now maneuvering to force them to make blunders 2 and 3, as well -- a "hat trick." If he succeeds, the result -- and, most likely, his objective from the start -- will be not only his reelection, but Democratic control of the House of Representatives as well.

Here are the clues, tea leaves and puzzle pieces that support this analysis:

1. Obama Finds a Spine and Keeps Insisting on Raising Taxes: Until now, Obama has been over-quick to buy in to Republican frames. Republicans argue that the debt is too high (even though it's not); Obama agrees that the debt is too high and counterproductively supports budget cuts during a recession. Republicans say that healthcare should still be paid for privately; Obama agrees and doesn't even allow singlepayer advocates a seat at the healthcare reform table. Republicans argue that tax cuts are the key to an effective stimulus package; Obama agrees and squanders nearly half the stimulus on tax cuts.

But now Republicans are screaming that taxes shall not be raised -- and Obama, for the first time, is pushing back and insists that a tax increase is his one non-negotiable. Yet, strangely, Obama is not adamant about how large the tax increases ("revenue enhancements") must be; he is blithely willing to accept spending cuts that are disproportionately larger than any tax increases; all he really demands is that there must be some tax increases. He even signals a willingness to carve large, bloody chunks out of sacred cows like Social Security and Medicare and throw them on the grill for Republicans' dining pleasure -- if only the Republicans will just accept some itty, bitty little tax increases. And, at the same time, the G.O.P. suddenly seems panicked about the issue.

Why is Obama so hell-bent on increasing taxes, when conventional wisdom in an election (and a recession) says that's suicidal? And why is the G.O.P. suddenly turning pale and insisting gaspingly that it "will not, will not, will not EVER!" submit to increasing taxes, like a maiden hopelessly proclaiming her eternal chastity before a horde of slavering Mongols?

Poppy Bush.

In 1988, the first President Bush won the White House largely on the strength of a single, clear promise: "read my lips: no new taxes." Then, being a well-educated, old-school Republican and a pragmatist (who had called Reagan's supply-side theories "Voodoo Economics"), he adapted to changing circumstances and agreed some tax increases were necessary. His base exploded, his supporters stayed home on election day, and Bill and Hillary evicted George and Barbara after only one term.

The entire G.O.P. freshman class has, in more or less identical words, taken the same pledge as George H.W. Bush, and the Tea Party, like Grover Norquist but without his political sophistication, has made "no new taxes" its latest line in the sand. It's a binary, black-white, either-or test: either you increase taxes or you hold the line, and if you choose wrong, we will jettison you and back someone with more commitment to the anti-tax cause. And because a larger than usual proportion of the current G.O.P. majority are freshmen, and because freshmen are especially vulnerable in their first reelection, the G.O.P. majority is highly vulnerable to being overturned in 2012.

Obama knows this -- and so do the G.O.P.'s (relative) grown-ups, who now realize they're in a box and are looking desperately for a way out. That's why Boehner complained bitterly today that the only thing Obama is inflexible on is "these damn tax increases." That's why, as Brian Beutler has astutely observed here and here, even anti-tax zealot Grover Norquist has figured out what's happening and is moderating his absolutism to help the Republicans escape Obama's trap. That's also why the Wall Street Journal, always the oracle of Big Money and even more so now that it is part of Rupert Murdoch's propaganda machine, is defending Mitch McConnell's strange debt-ceiling proposal (which is simply a device for surrendering to Obama without having to raise taxes, made intentionally overcomplex in hopes that the Tea Party rank-and-file won't realize what's going on).

Obama is forcing the G.O.P. to pull a Poppy and break their pledge. The G.O.P. knows that it will pay a terrible price if it does so. But, when the final seconds tick their way to a default, those wiser G.O.P. heads also know that they will follow the financially-sensible bidding of Big Money rather than the suicidal bidding of the spoiled children who think they run the Tea Party, and will do what Obama (and Wall Street) demand -- after which they will start privately telephoning friends in important places to look for job openings beginning in January, 2013.

2. In a Tie, The Call Goes to the Democrat: But, you say, isn't Obama under the same pressure as Republicans to lift the debt ceiling, so that he's as likely to hit the brakes as they are before the nation drives off the cliff?


True, Obama doesn't want the U.S. to default. But he has skilfully positioned himself as the more reasonable player by offering tax cuts much larger than his proposed tax increases, by leaking to the Washington Post and others that he is willing to alienate his base by gouging Medicare and Social Security, and by manipulating the Republicans into huffily walking out of negotiations (and into Obama's trap). The majority of Americans will blame Republicans, not Obama, for any default -- and both sides know it.

History bolsters this conclusion. The last time a Democratic President and an ideologically purist Republican Congress allowed a stalemate to shut down the government, Republicans lost in the public's mind (and those Republicans, the infamous "Contract With America" class led by Newt Gingrich, was then voted out of office, allowing Democrats to regain the House). A default now will be much, much more harmful than the brief shutdown that occurred in 1995-1996 , and the negative consequences for Republicans will be proportionately worse as well.

In the leadup to the current negotiations, Boehner tried to position the G.O.P. differently than Gingrich did in 1995, but he clearly has failed. Politically, Obama has less to lose than the Republicans do -- and, as one of my father's truisms says, you should never get in a fight with someone who has less to lose than you do. In Boehner's nightmares, he could go down in history as the man who allowed the nation to double-dip into the Second Great Depression and permanently stripped the G.O.P. of the "fiscal grown-up" label it has claimed since before WWII. He won't take that risk.

3. Wall Street will not allow the G.O.P. to cause a default: Pundits and talking heads keep focusing on the Tea Party's likely reaction to a tax increase, forgetting that fiscally there is another, more deeply imbedded, subtler but infinitely more mercenary influence on Republican politics: Big Money. Big Money -- Wall Street, the U.S. Chamber of Commerce, the myriad networks of individual donors and independent campaign ad funders and potential post-Congressional-career employers that are the G.O.P.'s (and, to be fair, half of the Democratic Party's) true constituents -- calmly allows its minions to showcase and speechify and engage in tiny, irrelevant acts of political theater to meet the needs of the political moment, but the ground of Big Money's existence is the integrity of the financial system. Are big banks about to go under? D.C. is mobilized overnight, ideology is set aside, and supposed free marketeers like John Boehner tearfully beg Congress to intervene in the free market to bail them out.

If Big Money can make conservative congresscritters scramble to serve its will when a few banks are on the bubble, what do you think it can accomplish when the integrity of the U.S. government -- the ground of the U.S. financial system's being, the issuer of public tender and surety of U.S. businesses' credibility in world markets -- is in jeopardy? Answer: anything it wants. Big Money can tell Boehner to step down and retire, and he will. It can tell Paul Ryan to jettison his budget, and he will. It can tell Eric Cantor to back down from his hardcore rhetoric, and Ron Paul to silently brook a larger federal government, and they will.

The pressure's already building -- the normally pro-Republican U.S. Chamber and other business leaders, carefully prepped and cultivated by the Administration well in advance of this crisis (!), already have started leaning on Republicans to take a deal, and Moody's is threatening to downgrade U.S. securities. If Obama can sustain his bluff to the bitter end, the G.O.P. will do whatever it takes to prevent a default, because their masters are telling them to do so. (And don't believe Cantor's assertion that passing a bill raising taxes is impossible: the unofficial "Wall Street Caucus" has always been larger than the Tea Party Caucus, and combined with House Democrats, who outnumber Tea Party Caucus members three-to-one, can easily pass whatever is needed.)

The process of persuading the G.O.P. to accept the inevitable has already begun; it's precisely the slowly-dawning realization that Republican control of the House is at stake that's making G.O.P. leaders look so shaky lately. It's why Mitch McConnell has, remarkably, proposed an alternative bill that would actually increase the power of a Democratic president -- and why Obama has rejected the offer. It's why the White House adamantly refuses to accept any short-term, pressure-relieving solutions.

Admittedly, Obama might not be able to pull off his hat trick. In particular, if the House were to cut its losses, abandon negotiations altogether and unilaterally pass a clean, stand-alone, two-year debt ceiling increase, it would be hard for Harry Reid not to allow a similar bill to pass the Senate, and even harder for Obama to veto it (though if he has nerves of steel he could do so, and force the House Republicans to accept a package of spending cuts and tax increases in the minutes before their midnight deadline). But in the meantime, Obama will keep slapping pucks at the G.O.P.'s beleaguered orange goalkeeper, trying to go three for three.

If winning a landslide reelection and reclaiming the House are indeed his true objectives, look for Obama to do the following:

1. Keep Taking Republicans to the Boards: At this point, this is full-contact politics. Look for Obama to keep up the hard play. Today's body blow: Obama rejected one version of a debt ceiling increase, "insisted on one comprehensive deal" (i.e., one including tax increases), threatened to veto any short-term approaches, promised to "stake his presidency" on the issue, and walked out of a meeting with Canter. Look for more of the same.

2. Divide and conquer: Obama's game depends on splitting the Tea Party Caucus from the Wall Street gray eminences, and foolish ideologues like Cantor from pragmatists like Boehner. Look for him to exploit every opportunity to drive wedges -- as he did today when he walked out of a meeting with Cantor, to Boehner's almost certain aggravation. If Obama's plan is working, on the other hand, look for ideological freshmen like Mike Lee (R-UT) to stop saying stupid, divisive things -- a sign that their elders are explaining how the world really works. And also look for the better strategists on the G.O.P. side to air increasingly desperate plans to avoid being forced to raise taxes -- which will, in turn, bring fresh waves of outcry from party purists.To aggravate Republicans' internal divide, also look for Obama to uncharacteristically toss darts and jibes at the TeaParty to aggravate it further, at least until the deal's down to the short strokes.

3. Move to the Right on Debt: If the G.O.P. suggests a clean debt ceiling increase, Obama will co-opt the "debts matter" argument and, with less-politically-savvy purists like Paul Krugman screaming epithets at him, will demand budget cuts (and, by the way, just one wafer-thin little tax increase!) as part of any deal. He will reiterate, over and over, that if not now, when? He will, to the dismay of the people at FireDogLake, adopt Frank Lautenberg talking points, crying that he does not want Sasha and Malia to inherit debt simply because John Boehner isn't willing to cut spending (with, again, just one tiny, insignificant tax increase attached).

4. Appear to be Caving on Cuts and Entitlements: Perversely, if Obama is focused on retaking the House, he will temper his hard-line position on tax increases by being almost ridiculously open to spending cuts and entitlement "reform" that his base considers intolerable. There are several reasons for this. First, the "raising taxes" pill is so poisonous that nearly any sacrifice that leads to them swallowing it is worthwhile. Obama is willing to eat a lot of garbage in exchange for the Republicans swallowing one teeny, tiny little tablet of cyanide. Second, any major cuts that pass the House must still pass the (Democrat-controlled) Senate. Finally, regaining both Houses of Congress opens the possibility of Democrats repairing any damage to entitlements that today's deal causes.

5. Almost inexplicably, keep avoiding a "clean vote" on the debt ceiling: Even down to the last minute. Good games of chicken take it all the way to the edge of the cliff.

Finally, how will we know if Obama has completely pwn3d the G.O.P.? Easy: the House of Representatives will, before the default deadline, pass a negotiated package that lifts the debt ceiling, contains something that can be characterized by wingnuts as a tax increase, and infests the G.O.P.'s 2012 platform's "debt hawk" plank with so much dryrot that it will be unsafe for them to stand on it.



Sko said...

This is great thinking and more detail than I've seen in any other analyses.
I posted a link to this over at Balloon Juice, hope you don't mind!

WereBear said...

Dang, I love this analysis. I kept saying the President's actions were not inexplicable, but I did not know all the nuances.

M.S. Bellows, Jr. said...

WereBear: thanks! Sko: thanks to you, too! Awesome that you posted that link; I'm shopping this post to larger outlets right now and so am not trying to publicize it, but wth, I'm ecstatic that you noticed (and I'm seeing a lot of traffic from your comment, believe it or not). Thanks again!

NobodobodoN said...

Very astute analysis. I'll be watching for your signs to watch for in the coming weeks.

I've always felt that the current president, like the previous one, is at his most cunning when he appears most facile.

Lysana said...

Small detail correction: He didn't walk out of a meeting with Cantor. He was working on closing a meeting with several people, including Cantor, after 2.5 hours when Cantor started trying to interrupt him. Obama slapped Cantor down and closed the meeting as he said he was trying to do. Cantor lied and claimed it was Obama storming out.

MsJoanne said...

And I put it up at Washington Monthly.

Rich M said...

Lawrence O'Donnell did an analysis quite similar to this on his show on Wednesday. He too credits Obama with shrewdly putting the Republicans between a rock and a hard place.

Given an inability to compromise on anything the TeaParty gang may just as well have sent a presigned proxy with only one answer possible and stayed back in the home district. And I agree that if their political existance is predicated on satisfying a constituency largely comprised of fellow Teapartiers they are just screwed and can in noay contemplate a tax increase of any kind. For the remained of Republicans, I believe, for them to contemplate a tax increase is not the poison pill you make it out to be. Recent polls show that now even 75% of them see the need to include some form of tax increase in any measure to bring our deficit under control.
On the balance, I think the Republicans have highlighted enough shortcomings to jeopardize their majority in 2012. But then again I will never be amazed at what our electorate is capable of.
To think they are capable of believing this economy is one of Obama's creation, amazing.
Bottom line, Obama has indeed played a clever, Machiavellian game of the debt ceiling. But this is a position Republicans first created for themselves by insisting the debt ceiling was nothing to be worried about.

Lastly, Al Franken also does a terrific job pointing out the contradictions in Republican financial positions.